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Miss FITZPATRICK. No, Senator. What we are proposing is a transfer of the power marketing activity; all of the other activities in the Federal Government of these multipurpose projects, which includes irrigation, flood control facilities and recreation, would remain under Federal control.

Senator ABDNOR. I see. We could always bank on the 170 megawatts then. Is that your understanding, too, Mr. Clagett?

Mr. CLAGETT. Senator, I would expect that that is one of the many, many things that we would have to address in this effort.

Senator ABDNOR. That isn't apt to change, and that bothers me. My people felt a pretty strong commitment. I don't know what we could have done to stop you from building the dams, but so far, we have seen darn little benefits. Most of the power we produce goes out of the State. We do not have enough public power, I guess. We are at the small end of all the States getting the power out of it; we are the ones holding back all the water to keep people from flooding downstream. We lost our recreation grounds holding back water.

There was a commitment: along with some irrigation, we were going to reserve 170 megawatts for our irrigation some day. These are the things we would have to renegotiate again in the event something like this would happen. Do you think we are going to have to do that, or is the understanding there and will it remain that way? In other words, this power will be available for irrigation regardless of what happens with the sale?

Mr. CLAGETT. Senator, that is one of the many obligations we have, and I would expect under the guidelines we have that that obligation would be preserved.

INCREASED ELECTRICITY RATES Senator ABDNOR. I would certainly hope so. I guess I have some questions, ones that got away from us, about how much control we would have over it. I guess the only other thing I am going to say, and I hope it is not a live issue at this time; I am going to do everything I can to make sure it isn't.

But I would hate to think the first time, Mr. Chairman, our farmers are finally getting a break out our way with fuel costs coming down a bit. I know it doesn't speak well for the petroleum companies, but there is one group that is getting a tremendous break—the elderly and the farmers who are broke. I don't think anyone questions that any more. We used to come in here and complain, and people didn't really realize the plight of the farmer. Now I think they do. We gave them a little breathing room. Now all of a sudden we are talking about selling this power to the private sector.

I think the Senator from North Dakota mentioned the difference in the prices, what the extra costs would be. This is not the time for something like that. We are having trouble in the Federal Government with our financial problems, but I will tell you, rural America has really got them, and this is not the time to put them in a worse strait than they are today.

Thank you.
Chairman HATFIELD. I thazk the Senator.

Senator, I think from time to time that an issue like this is helpful in focusing a review of our philosophy, and so it is a good philosophical expression, and it also teaches us to appreciate, perhaps, more specifically what we presently have and recommit ourselves to those values like the Constitution, PMA's, and other such important documents that brought our country into progress. (Laughter.]

Senator BURDICK. Mr. Chairman, can I have an addendum to my question? Chairman HATFIELD. Yes, you may.

DEFEDERALIZATION OF PMA'S Senator BURDICK. Miss Fitzpatrick, for clarification, will the administration pursue negotiations or discussions or initiate any activities for the defederalization or the privatization of the PMA's prior to the grant of legislative authority?

Miss FITZPATRICK. There are activities that we are initiating now which, basically will delineate the issues, some of which have been raised here today. We are trying to identify issues and see what possible solutions might be.

But as I said, there will be no action taken, no change of status of any PMA without legislative authority.

Senator BURDICK. But you are burning the midnight oil and trying to find a way and means to do what you suggested a while ago?

Mr. Fitzpatrick. We are trying to find what the answers will be to the questions that are being asked here.

Senator BURDICK. You could save a lot of money and a lot of time if you just forgot about it. (Laughter.]

Chairman HATFIELD. That is getting to the bottom line pretty fast.
Senator BURDICK. That is all. Thank you.

Chairman HATFIELD. Again, Madam Secretary, you have really been a great witness. We have enjoyed having you here.

Miss FITZPATRICK. Thank you.

JOHNSOK. At highlightill be placemitted for the

BONNEVILLE POWER ADMINISTRATION STATEMENT OF PETER T. JOHNSON, ADMINISTRATOR

Chairman HATFIELD. I think I will reserve myself on the calling of the PMA directors and go by seniority, remembering that we follow that procedure assiduously around the Senate, and invite the most senior by age of the Act rather than the age of the Administrator.

The Director of the Bonneville Power Administration, Mr. Johnson?
Mr. JOHNSON. Thank you, Mr. Chairman.
My complete statement has been submitted for the record.

Chairman HATFIELD. It will be placed in the record in full, and you may summarize or highlight as you wish.

Mr. JOHNSON. I will be very brief and would be happy to answer questions afterward.

FINANCIAL STATUS OF BPA Looking back over the last 5 years, about how long I have been the Administrator of Bonneville, I remember the encouragement given by your committee and its members to Bonneville to take the actions necessary to bring Bonneville into better fiscal health where it could, in fact, meet its obligations to the U.S. Treasury.

We have taken a number of actions, most particularly looking at ways by which we could hold costs and improve efficiencies. As a result, in 1984 we made all of our planned payments to the U.S. Treasury, and that summed up to about $650 million. In fiscal year 1985, we again made all of our payments, including interest and amortization, to the U.S. Treasury. These payments totaled about $686 million.

We face, however, not unlike in the past, a dynamic future. Just recently, as I am sure members of the committee are aware, prices for gas and oil have fallen in California, which is one of the big markets for Bonneville. So we are presently underrunning the anticipated revenues from the sale of our nonfirm energy exported into California.

The aluminum companies which located in the Northwest now represent 25 percent of our load. These companies continue to face depressed world prices for aluminum. We still, however, because of cost efficiencies and tight fiscal management, feel very confident that in fiscal year 1986, we once again are going to be successful in meeting all our payments to the U.S. Treasury and can make our planned amortization payment. That will total some $670 million this year.

In conclusion, we see two major objectives—a lot of others, as wellbut two major objectives as we look at 1987 and beyond. One is to continue honoring our obligations to the U.S. Treasury, as we have in these last 3 years. The second is, in this volatile market I have de

scribed, to continue to provide rate stability and predictability in the Pacific Northwest in order to assist in revitalization of what has been a very weak economy.

Mr. Chairman, that completes my comments. I would be glad to answer questions that you or other Senators may have.

Thank you.
[The statement follows:)

STATEMENT OF PETER T. JOHNSON, ADMINISTRATOR, BONNEVILLE POWER ADMINISTRATION

Mr. Chairman and Members of the Committee. It is a pleasure to come before you today to present Bonneville Power Administration's FY 1987 Budget.

BPA'S DYNAMIC ENVIRONENT

BPA was created on August 20, 1937, by the Bonneville Project Act.

PY 1987

will nark 50 years of providing low-cost, reliable electric service to the Pacific Northwest. I am pleased to tell you that BPA nears its 50th anniversary healthy and un vaivering in its commitment to pursue its mission with efficiency and professionalism.

But these are dynamic times. The effect of the recent collapse of gas and oil rices on our California markets and continuing uncertainty regarding the future of the aluminum industry are just two of the challenges that face us as a utility. As a Federal agency, we are also facing potential change--both in

terms of ownership and in the way we repay the Federal investment in the

Pacific North west power system.

The President's FY 1987 budget calls for legislation that would transfer BPA's

transmission system and the related power generation now operated by the Corps

of Engineers and the Bureau of Reclamation to non-Federal owership or control.

The budget proposal assumes that defederalization will not take effect until the beginning of PY 1988, to allow time to work out numerous implementation issues. The budget proposal further assumes that BPA vould be sold at a price equal to the unpaid Federal investment--approximately $8.85 billion. I want to emphasize that these are assumptions for budget purposes only. A proposed sale price and date of transfer will be deve loped following an extensive public review process.

Through that process the administration will seek the views of various

concerned groups and individuals. A task force 18 currently developing a

detailed work plan to move ahead with this process. There are many complex

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